In the fourth quarter of 2020, Euro Cycling, a bike shop, had the following net income: 

Sales..............................................................$550,000 

Less cost of sales...........................................250,000 

Gross margin.................................................300,000 

Selling and administration.............................70,000 

Income before taxes.....................................230,000 

Taxes on income..............................................46,000 

Net income....................................................$184,000 

Purchases in the fourth quarter amounted to $195,000. Estimated data for Euro Cycling for 2021 are as follows: 

Taxes are 20 percent of pretax income and are paid in the quarter incurred. Fifty percent of sales are collected in the quarter of sale and 50 percent are collected in the next quarter. Seventy percent of purchases are paid in the quarter of purchase and 30 percent are paid in the next quarter. Selling and administrative expenses are paid in the quarter incurred except for $7,000 of depreciation included in selling and administrative expense. A capital expenditure for $20,000 is planned for the fourth quarter of 2021. 

Required 

Prepare a cash budget for each quarter of 2021.

Transcribed Image Text:

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Sales $400,000 $475,000 185,000 $550,000 $600,000 Cost of sales 170,000 220,000 230,000 Purchases 160,000 200,000 225,000 267,000 Selling and administration 67,000 69,000 71,000 73,000